Should you pay yourself an extra dividend?
November 5, 2015 | By Nimbus |
Up until the chancellor delivered his Summer Budget it was possible to pay less tax if you ran your business through a limited company, this was because you could avoid National Insurance. If you are one of the many people that took advantage of this structuring then from 6 April 2016 your dividends are going to become more expensive. We covered the changes in more detail in our blog on the summer budget in July, but here are the headline changes that impact dividends:
- Tax rate on dividends is increasing by 7.5%
- The old notional 10% tax credit is being abolished
- The first £5,000 of dividends will be tax free
If you have retained earnings in your company that you are thinking of withdrawing at some point in the future, why not pay them out before the rate increases in April? It is worth taking a moment to consider if it is sensible to take a dividend before the change, if you are not a higher rate tax payer and you have some capacity to take a dividend without incurring any tax, it might be the time to do so.
For those with a lot of money tied up in their company and thinking of calling it a day, remember that Entrepreneurs relief at 10% might be available. This is certainly the cheapest way of getting your money out of a company structure.
If you would like to discuss dividends or liquidating your company in more detail, give one of our accountants a call on 01273 782 747, or visit our Contact Us page for our email address and Skype details.